Yesterday we heard about the closing of the Ravensthorpe soft-coking coal mine in Newcastle and, it has to be said, it won’t be the last. As the Australian dollar pins its ears back, the coking price is crashing to hitherto undreamed of lows at $114 :
My long term forecast made in 2012 was for a low of $110, by far the lowest in the market. That’s now looking too bullish with more supply coming on stream and the take-or-pay rail contracts ensuring masses of over-shipment . Here’s the latest BREE volumes chart:
BREE has forecast a 2014 price of $127.50. Good luck with that!
Thermal coal has also hit new lows this month, down to $74 and its going to remain under pressure too because of the supply ramp up:
BREE’s thermal coal forecast for this year is more realistic at $81 and lower again next year.
The lesson of coal is that commodity corrections take years to play out. The grind lower in prices does not result in a rational response of sub-economic closures. Rather, it’s a mad scramble to survive, red ink all over the joint and a long and irrational price drop.
Iron ore has a few advantages over coal in its geographic and ownership concentration but the same process has begun.
